2021 REGULAR SESSION
ACTUARIAL NOTE HB 29
Page 1 of 7
House Bill 29 HLS 21RS-306
Reengrossed with Senate Committee
Amendment #2512
Author: Representative Jefferson
Date: May 25, 2021
LLA Note HB 29.04
Organizations Affected:
Firefighters’ Retirement System
RE1 NO IMPACT APV
This Note has been prepared by the Actuary for the Louisiana Legislative Auditor
(LLA) with assistance from either the Fiscal Notes staff of the Legislative Auditor
or staff of the Legislative Fiscal Office (LFO). The attachment of this Note provides
compliance with the requirements of R.S. 24:521 as amended by Act 353 of the 2016
Regular Session.
James J. Rizzo, ASA, EA, MAAA
Senior Consultant & Actuary
Gabriel, Roeder, Smith & Company
Piotr Krekora, ASA, EA, MAAA, PhD
Senior Consultant & Actuary
Gabriel, Roeder, Smith & Company
Bill Header: RETIREMENT/FIREFIGHTERS: Provides relative to Firefighters' Retirement System's Deferred Retirement Option
Plan and unfunded accrued liability.
Cost Summary:
The estimated net actuarial and fiscal impact of this proposed legislation on the retirement systems and their plan sponsors is summarized
below. Net Actuarial Present Values pertain to estimated changes in the net actuarial present value of future benefit payments and
administrative expenses incurred by the retirement system
1
. Net fiscal costs or savings pertain to changes to all cash flows over the
next five-year period including retirement system cash flows, OPEB cash flows, or cash flows related to local and state government
entities.
An increase in actuarial costs is denoted throughout the actuarial note by “Increase” or a positive number. Actuarial savings are denoted
by “Decrease” or a negative number. An increase in expenditures or revenues (fiscal impact) is denoted by “Increase” or a positive
number. A decrease in expenditures or revenues is denoted by “Decrease” or a negative number.
Estimated Actuarial Impact:
The top part of the following chart shows the estimated change in the net actuarial present value of future benefit payments and
expenses, if any, attributable to the proposed legislation. The bottom part shows the effect on cash flows (i.e., contributions, benefit
payments, and administrative expenses).
Net Actuarial Present Values Pertaining to:
Net Actuarial
Present Values
The Retirement Systems 0
Other Post-employment Benefits (OPEB) 0
Total 0
Five Year Net Fiscal Cost Pertaining to: Expenditures Revenues
The Retirement Systems – Agy Self Generated 0 0
Other Post-employment Benefits (OPEB) 0 0
Local Government Entities 0 0
State Government Entities 0 0
Total 0 0
Bill Information
HB 29 addresses three different subjects, each of which is described below under Current Law, Proposed Law and Implications.
Current Law
The current laws for the provisions affected by HB 29 as amended are:
1. Method of Financing
Entities employing members of the Firefighters’ Retirement System are responsible for remitting contributions to
appropriate funds. Current law allows FRS to add interest to delinquent amounts, based on the greater of the actuarial
valuation rate or the actual rate of earnings on the system’s investment portfolio.
2. Dissolution of Fire Departments
FRS is a multiple employer defined benefit pension plan providing retirement benefits for employees of employers electing
to participate in the system. The following employers may participate in FRS: FRS (as an employer of staff employees)
1
Note: This is a different assessment from the actuarial cost relating the 2/3 vote (refer to the section near the end of this Actuarial
Note “Information Pertaining to Article (10)(29)(F) of the Louisiana Constitution”). 2021 REGULAR SESSION
ACTUARIAL NOTE HB 29
Page 2 of 7
and any municipality, parish, or fire protection district in the state of Louisiana, excepting Orleans and Lafayette Parishes,
which employs a full-time fireman.
Current law provides for FRS to recover delinquent payments by action in a court of competent jurisdiction against a
political subdivision or instrumentality liable for the payments.
3. Assignment of Employee Contributions
Current law allows a member of FRS to assign his accumulated contributions to a designated credit union in consideration
of a loan, provided he has less than twelve years of creditable service. If the member leaves employment, the accumulated
employee contributions are required to be paid to the designated credit union.
The credit union applies the refund of contributions to the balance of the loan, and any surplus is returned to the member.
Proposed Law
The provisions under HB 29 corresponding to the above current laws are:
1. Method of Financing
In addition to assessing interest on amounts due prescribed under the current law, HB 29 provides for recovery of
reasonable attorney fees and court costs to amounts due which are based on:
• Delinquent contributions, and
• Concursus proceedings instituted pursuant to C.C.P. Art. 4651 et seq., wherein FRS is named as a party.
2. Dissolution of Fire Departments
HB 29 provides that if an employer fully dissolves its fire department, then beginning the first July following the
dissolution, the employer will pay the department's proportionate share of the System’s net pension liability (NPL).
A fire department will be considered partially dissolved if either: (i) the number of participating employees decreases by
at least 30% (and by at least three employees) from one June 30th to the next or (ii) the number of participating employees
decreases by at least 50 employees from one June 30th to the next. If an employer partially dissolves its fire department,
it will pay a pro rata portion of the system's unfunded actuarial liability (UAL) in addition to its required contribution based
on its remaining membership. A local government need not make a conscious decision to partially dissolve its fire
department (or to merge or subcontract with another government for fire protection service) for the provisions in HB 29
to apply. The two conditions above define “partial dissolution” with the resultant funding requirements, whether by reason
of a conscious decision to partially dissolve or by operational roll-backs in workforce.
The NPL associated with full or partial dissolution due to the system will be determined by the system's actuary using the
rules for employer accounting and financial reporting issued by the Governmental Accounting Standards Board (GASB)
and amortized over 15 years in equal payments.
If the number of employees of a partially dissolved fire department returns back to the number participating prior to the
withdrawal, payments will cease, and payments made will be credited as an offset to any amount due by the employer
attributable to any subsequent withdrawal that occurs within 15 years of the payments.
If an employer fails to make a payment in a timely manner, in addition to continued authorization under the current law
for FRS to collect delinquent amounts by action against the employer in a court of competent jurisdiction, HB 29 extends
FRS’s recovery options by having the state treasurer deduct monies payable to the employer and remit said monies directly
to the system.
3. Assignment of Employee Contributions
HB 29 provides that if a member has 12 or more years of creditable service with a valid assignment of employee
contributions and dies without a survivor who is entitled to his benefits, payment of the accumulated employee
contributions will be made to the designated credit union as authorized under current law for when a member leaves
employment.
Implications of the Proposed Changes
The implications of the above provisions under HB 29 affecting the current laws are:
1. Method of Financing: FRS will be allowed to collect reasonable attorney fees and court costs when recovering
delinquent contributions, as well as amounts due when FRS is named as a party in any concursus proceeding instituted
pursuant to C.C.P. Art. 4651 et seq.
2. Dissolution of Fire Departments: An employer participating in FRS will become responsible for its portion of the FRS
NPL should it completely or partially dissolve its fire department, whereas under current law it has no such continuing
responsibility.
3. Assignment of Employee Contributions: Certain payments of accumulated employee contributions may be made to
firefighter credit unions under HB 29 in the event of death, in addition to termination under current law.
2021 REGULAR SESSION
ACTUARIAL NOTE HB 29
Page 3 of 7
I. ACTUARIAL IMPACT ON RETIREMENT SYSTEMS AND OPEB [Completed by LLA]
A. Analysis of Net Actuarial Costs
(Prepared by LLA)
This section of the actuarial note pertains to net actuarial present value costs or savings associated with the retirement systems and
with OPEB.
1. Retirement Systems
The net actuarial cost or savings of the proposed legislation associated with the retirement systems is estimated to be $0. The
actuary’s analysis is summarized below.
Method of Financing: HB 29 will likely provide a greater incentive for employers to make the required contributions and to
pay amounts due to concursus proceedings in a timely manner, but is not expected to change the cost of the system.
Dissolution of Fire Departments: This part of HB 29 imposes a withdrawal liability on employers that satisfy the conditions
for full or partial dissolution, as defined in the proposed law. This will not change the amount of benefits payable to members.
It will, however, prevent cost-shifting of the financial responsibility for the remaining obligation from the withdrawing
employer(s) to the remaining employers.
HB 29 causes the withdrawing employer to bear an ongoing funding obligation with respect to the exiting members; whereas
under current law, there is no such obligation remaining for the withdrawing employer with respect to the exiting members
even though the System may be less than 100% funded (by any reasonable measure).
HB 29 holds the withdrawing employer responsible for continued funding of an approximate measure of its ongoing obligation.
However, the NPL described in HB 29 does not match the System’s remaining liability for the exiting members being funded
through the System. The proposed bill relies on the proportionate share of the total NPL for the withdrawing employer to pay
over time. This employer-specific NPL established under the proposed law is based on the calculations required by accounting
and financial reporting rules issued by the GASB for the employer’s financial statements before it withdraws, which are
different from the rules employed by the statutes for funding the plan for a withdrawing employer under the current law.
Full or partial dissolution under current law
Consider the effects on an employer and on the System, resulting from an employer withdrawing some or all of its active
employees under current law. The employer makes no more contributions to the System in relation to the exiting employees:
neither the ongoing normal cost component nor the ongoing unfunded actuarial liability amortization payment component.
Even though the System collects no more contributions from the withdrawing employer in relation to the exiting employees,
the System retains the obligation to pay the future benefits earned by the withdrawing employer’s current retirees, any vested
terminated employees and the vested benefits earned by the exiting employees (sometimes called the actuarial present value
of accrued benefits).
If the System already had sufficient total assets to cover the total actuarial present value of all its members’ vested benefits,
then the System would have no need for additional contributions from a withdrawing employer with respect to its exiting
employees based on actuarial expectations (except that the System has no recourse to collect from the withdrawing employer
in the event that there are actuarial losses due to actual investment and other experience differing from what was assumed). On
the other hand, if the System does not already have sufficient assets to cover the total actuarial present value of all its members’
vested benefits, it has unfunded vested benefits (UVB); and the System loses a source of revenue to complete the financing of
its obligation to exiting members of the System, regardless of how the obligation is calculated.
Full or partial dissolution under HB 29
Consider the effects on an employer and on the System, resulting from an employer withdrawing under the proposed law. It
requires the System to set up an additional employer-specific liability to amortize and receive payments over time. The
withdrawing employer is required to pay off that newly established amortization base. For full dissolutions, these amortization
payments continue to be required even though there are no regular employer contributions remaining to be paid to FRS. For
partial dissolutions, these amortization payments are required in addition to the regular employer contribution requirements
made with respect to remaining covered employees.
There are a number of ways to measure the obligation, whether it is the UVB, or the ongoing accounting NPL or the unfunded
actuarial liability using the System’s current actuarial cost method (the Frozen UAL). While the amount of the proportionate
NPL established in this part of HB 29 for amortization is not an exact representation of the obligation for exiting employees it
is a convenient estimate.
This provision of HB 29 results in a significant increase in contributions from the withdrawing employer after a full or partial
dissolution, as compared to current law. Conversely, it is expected to result in a similar level of decrease in aggregate
contributions from all other FRS-participating local governments, as compared to current law. This assumes the System’s
actuary would reduce the frozen UAL financed by all other participating employers by the newly established employer-specific
frozen UAL (equal to the employer’s proportionate share of the total NPL) financed by the withdrawing employer. No
member’s benefit changes as a result of this part of HB 29.
Assignment of Employee Contributions: This provision is not expected to result in a change in the amount of benefits payable
and is not expected to have an actuarial cost. 2021 REGULAR SESSION
ACTUARIAL NOTE HB 29
Page 4 of 7
2. Other Post-employment Benefits (OPEB)
The net actuarial cost or savings of the proposed legislation associated with OPEB, including retiree health insurance premiums,
is estimated to be $0. The actuary’s analysis is summarized below.
The liability for post-retirement medical insurance protection provided to retirees is not affected by the provisions of HB 29
relating to method of financing, dissolution of fire departments, or assignment of employee contributions.
B. Actuarial Data, Methods and Assumptions
(Prepared by LLA)
Unless indicated otherwise, the actuarial note for the proposed legislation was prepared using actuarial data, methods, and
assumptions as disclosed in the most recent actuarial valuation report adopted by the Public Retirement Systems’ Actuarial
Committee (PRSAC). The data, methods and assumptions are being used to provide consistency with the actuary for the retirement
system who may also be providing testimony to the Senate and House retirement committees. With certain exceptions, the actuary
for the LLA finds the assumptions used by the retirement systems and PRSAC to be reasonable.
C. Actuarial Caveat
(Prepared by LLA)
There is nothing in the proposed legislation that will compromise the signing actuary’s ability to present an unbiased statement of
actuarial opinion.
II. FISCAL IMPACT ON RETIREMENT SYSTEMS AND OPEB [Completed by LLA]
This section of the actuarial note pertains to fiscal (annual) costs or savings associated with the retirement systems (Table A) and with
OPEB (Table B). Fiscal costs or savings in Table A include benefit-related actuarial costs and administrative costs incurred by the
retirement systems.
A. Estimated Fiscal Impact – Retirement Systems
(Prepared by LLA)
1. Narrative
Table A shows the estimated fiscal impact of the proposed legislation on the retirement systems and the government entities
that sponsor them. A fiscal cost is denoted by “Increase” or a positive number. Fiscal savings are denoted by “Decrease” or a
negative number. A revenue increase is denoted by “Increase” or a positive number. A revenue decrease is denoted by
“Decrease” or a negative number.
Retirement System Fiscal Cost: Table A EXPENDITURES 2021-22 2022-23 2023-24 2024-25 2025-26 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
REVENUES 2021-22 2022-23 2023-24 2024-25 2025-26 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
All expenditures for employer contributions are reflected on a single line in the table above. The actual sources of funding
(e.g., Federal Funds, State General Fund) may vary by employer and are not differentiated in the table.
The proposed legislation will have the following effects on retirement related fiscal costs and revenues during the five year
measurement period.
2. Expenditures:
No measurable effects.
3. Revenues:
No measurable effects. 2021 REGULAR SESSION
ACTUARIAL NOTE HB 29
Page 5 of 7
B. Estimated Fiscal Impact – OPEB
(Prepared by LLA)
1. Narrative
Table B shows the estimated fiscal impact of the proposed legislation on actuarial benefit and administrative costs or savings
associated with OPEB and the government entities that sponsor these benefit programs. A fiscal cost is denoted by “Increase”
or a positive number. Fiscal savings are denoted by “Decrease” or a negative number. A revenue increase is denoted by
“Increase” or a positive number. A revenue decrease is denoted by “Decrease” or a negative number.
OPEB Fiscal Cost: Table B EXPENDITURES 2021-22 2022-23 2023-24 2024-25 2025-26 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
REVENUES 2021-22 2022-23 2023-24 2024-25 2025-26 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
All expenditures for employer contributions are reflected on a single line in the table above. The actual sources of funding
(e.g., Federal Funds, State General Fund) may vary by employer and are not differentiated on the table.
The proposed legislation will have the following effects on OPEB related fiscal costs and revenues during the five year
measurement period.
2. Expenditures:
No measurable effects.
3. Revenues:
No measurable effects.
III. FISCAL IMPACT ON LOCAL GOVERNMENT ENTITIES [Completed by LLA]
This section of the actuarial note pertains to annual fiscal costs (savings) relating to administrative expenditures and revenue impacts
incurred by local government entities other than those included in Tables A and B. See Table C.
Estimated Fiscal Impact - Local Government Entities (other than the impact included in Tables A and B)
(Prepared by Local Government Services, Legislative Auditor’s Office)
1. Narrative
From time to time, legislation is proposed that has an indirect effect on administrative expenditures and revenues associated
with local government entities (other than the impact included in Tables A and B). Table C shows the estimated fiscal
administrative cost impact of the proposed legislation on such local government entities. A fiscal cost is denoted by “Increase”
or a positive number. Fiscal savings are denoted by “Decrease” or a negative number. A revenue increase is denoted by
“Increase” or a positive number. A revenue decrease is denoted by “Decrease” or a negative number.
2021 REGULAR SESSION
ACTUARIAL NOTE HB 29
Page 6 of 7
Fiscal Costs for Local Government Entities: Table C EXPENDITURES 2021-22 2022-23 2023-24 2024-25 2025-26 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
REVENUES 2021-22 2022-23 2023-24 2024-25 2025-26 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
The proposed legislation will have the following effects on fiscal administrative costs and revenues related to local government
entities during the five year measurement period.
2. Expenditures
No measurable effects.
3. Revenues:
No measurable effects.
IV. FISCAL IMPACT ON STATE GOVERNMENT ENTITIES [Completed by LFO]
This section of the actuarial note pertains to annual fiscal cost (savings) relating to administrative expenditures and revenue impacts
incurred by state government entities other than those included in Tables A and B. See Table D.
Estimated Fiscal Impact − State Government Entities (other than the impact included in Tables A and B)
(Prepared by Chris Keaton, Legislative Fiscal Officer)
1. Narrative
From time to time, legislation is proposed that has an indirect effect on administrative expenditures and revenues associated
with state government entities (other than the impact included in Tables A and B). Table D shows the estimated fiscal
administrative cost impact of the proposed legislation on such state government entities. A fiscal cost is denoted by “Increase”
or a positive number. Fiscal savings are denoted by “Decrease” or a negative number. A revenue increase is denoted by
“Increase” or a positive number. A revenue decrease is denoted by “Decrease” or a negative number.
Fiscal Costs for State Government Entities: Table D EXPENDITURES 2021-22 2022-23 2023-24 2024-25 2025-26 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
REVENUES 2021-22 2022-23 2023-24 2024-25 2025-26 5 Year Total
State General Fund $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Agy Self Generated 0 0 0 0 0 0
Stat Deds/Other 0 0 0 0 0 0
Federal Funds 0 0 0 0 0 0
Local Funds 0 0 0 0 0 0
Annual Total $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
The proposed legislation will have the following effects on fiscal costs and revenues related to state government entities during
the five year measurement period.
2021 REGULAR SESSION
ACTUARIAL NOTE HB 29
Page 7 of 7
2. Expenditures:
N/A - This bill only impacts local government, and therefore, has no state impact. The LFO does not review local government
bills.
3. Revenues:
N/A - This bill only impacts local government, and therefore, has no state impact. The LFO does not review local government
bills.
Credentials of the Signatory Staff:
James J. Rizzo and Piotr Krekora, on behalf of Gabriel, Roeder, Smith & Company, serve as the Actuary for the Louisiana Legislative
Auditor. They are Enrolled Actuaries, members of the American Academy of Actuaries, Associates of the Society of Actuaries and
have met the Qualification Standards of the American Academy of Actuaries necessary to render the actuarial opinion contained herein.
Actuarial Disclosure: Risks Associated with Measuring Costs
This Actuarial Note is an actuarial communication, and is required to include certain disclosures in compliance with Actuarial Standards
of Practice (ASOP) No. 51. Risk disclosures otherwise required by ASOP No. 51 do not apply to this Actuarial Note because the
proposed bill does not significantly change the types or levels of risks of the retirement system.
Information Pertaining to Article (10)(29)(F) of the Louisiana Constitution
HB 29 contains a retirement system benefit provision having an actuarial cost.
No members of the Firefighters’ Retirement System could receive a benefit, under any circumstances, that is greater under HB
29 than it would be under current law.
Dual Referral Relative to Total Fiscal Costs or Total Cash Flows:
The information presented below is based on information contained in Tables A, B, C, and D for the first three years following the 2021
regular session.
Senate House
13.5.1 Applies to Senate or House Instruments. 6.8F Applies to Senate or House Instruments.
If an annual fiscal cost ≥ $100,000, then bill is
dual referred to:
If an annual General Fund fiscal cost ≥
$100,000, then the bill is dual referred to:
Dual Referral: Senate Finance Dual Referral to Appropriations
13.5.2 Applies to Senate or House Instruments. 6.8G Applies to Senate Instruments only.
If an annual tax or fee change ≥ $500,000,
then the bill is dual referred to:
If a net fee decrease occurs or if an increase in
annual fees and taxes ≥ $500,000, then the bill is
dual referred to:
Dual Referral: Revenue and Fiscal Affairs
Dual Referral: Ways and Means